We are constantly being reminded that these are tough economic times.

Recession, depression or correction, no matter what name or spin is put on it, people are struggling.  The recent home mortgage crisis, gas prices, and changing job markets have put millions of people in very turbulent and unfamiliar financial waters.  If you are among the many that have used credit to keep up with daily life or cashed in on what used to be home equity to pay off your credit cards only to charge them back up, you may be at a point where just making your minimum monthly payments is getting harder by the day.

Your Options

Traditionally, only three options may come to mind when debt becomes unmanageable: Don't Make the Monthly Payments, Credit Counseling and Bankruptcy.

Don't Make the Monthly Payments

This usually includes not answering the phone and hoping that it all just goes away.  Some of us have had a friend or family member go this route and it is not hard to predict the results: Not only is their credit ruined while they are bombarded with creditor calls, if they are also delinquent on their car payments they usually try parking their car in a variety of places while they try to get caught up before the repo man’s tow truck catches up with them.  Ignoring debt can lead to creditors filing lawsuits and obtaining a judgment.  In some states, if the judgment is not resolved, it can lead to wage garnishments, liens on property and bank levies.


Credit Counseling

The second option: credit counseling, sounds nice enough.  You and your credit cards go in once a week, lie down on a couch and tell the nice man with the notebook about your feelings and how this is all the fault of your neglectful parents.  Not quite.  Credit counseling is basically an assistance program that guides you through your financial hardship by putting you on a Debt Management Plan, or payment plan.  Generally, counselors will assist in reducing your credit card rates to around 10% and the counselors are there to assist you to continue to pay your creditors as much as possible.  Fortunately, your payments are consolidated into one that is easier to manage.  For this assistance, credit counselors receive fees from the debtor AND are paid by the credit card companies in the form of ‘Fair Share’.  Historically, this “collection fee” from the credit card companies can be up to 15% of what you owe, though most creditors currently pay less.  It is this combination of Fair Share and fees from debtors that allowed credit counselors to be wildly successful and well known through their aggressive multimillion dollar advertising campaigns.  The credit counseling industry has been so financially successful that considerable regulatory scrutiny in recent years has resulted in the loss of the non-profit status previously held by the companies that made up the majority of the credit counseling services industry.  Although some credit counselors claim your actual "FICO Score" will not be directly affected by credit counseling, the truth is, lenders often view it negatively as the fact you are in a debt management program is noted on your credit report by your creditors indicating to some that you are unfit to manage your finances.  Combined with the fact that most debt management plans take over 5 years, many people are unable to afford these programs after enrolling. The payments are often no lower or slightly less than the payments the client was paying prior to enrolling in the plan.


The next option is the dreaded bankruptcy.  That spot on the Wheel of Fortune that takes everything you have and you start over with a clean slate.  Not so easy as some people think.  With the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 cleaning your slate is more difficult.  The bankruptcy that allowed so many people to be forgiven of, or discharged of their debts was the glorious chapter 7.  The BAPCPA of 2005 made it much more difficult to qualify for a chapter 7, instead forcing many to be evaluated for a chapter 13, a bankruptcy with a court ordered repayment plan.  In a chapter 13 the court will assess your income vs. your disposable monthly income, or DMI, and assign you to pay back your creditors.  Not only will you have to pay all or a portion of your previous bills, but the chapter 13 bankruptcy will be reported on your credit for 7 years though less than 10 years for a chapter 7.   Additionally, all the legal fees, embarrassment and future effects associated with the bankruptcy filing and the possible debt repayment plan, and whether it’s chapter 7 or 13, they can be very ugly chapters in your life.  If you are considering bankruptcy, you should consult with a qualified attorney.



Debt Negotiation

There is one more option, a lesser known life preserver to many called debt negotiation.  Debt Point places you in a program to resolve your debt by negotiating the principal balance owed. This plan allows for a simple monthly saving plan which unlike credit counseling, what you pay monthly can be much lower because the debts are negotiated for LESS than you owe.  In other words, the principle balance is negotiated, not just the interest. See our Debt Options Calculator to compare options. 

Debt negotiation will negatively affect your credit profile, but not like a bankruptcy.  Unfortunately, if you currently have good credit and are in a financial hardship, there is no easy way out and you cannot reduce what you owe with no negative effects at all.  Getting out of debt is hard and not everyone succeeds; However, our programs put debtors in the unusual position to potentially be debt free with plan that is typically estimated between 24-48 months.
There is no perfect solution to overwhelming debt and you should not consider our programs unless you are truly struggling.  Debt negotiation has some negatives to consider.  One is that clients who enroll will receive at least some creditor calls; no company can ever promise that a client will receive no calls.  Another applies especially to clients who enroll with excellent credit scores as they will be adversely affected.  However, when someone is drowning in debt, credit scores should not be a factor and there is no way to save them if they do not have the ability to pay their debt in full on their creditors' terms.  People who are able to get out of debt and free up money that was used for credit card debt may have much more "purchasing power" because of the more favorable debt to income ratio.  For example, if you were making minimum monthly payments of $1000.00 a month on high interest credit card debt, once your debt is resolved that money is now free and available for other expenses or investments.  This extra money could be used to upgrade your standard of living, invest, pay college tuition or anything more productive than throwing it away forever to high interest.  Furthermore, many people do not realize that if their credit is "maxed out" they may actually have worse credit than they thought. Maxed out credit lines indicate to lenders that they are over using their credit and may be headed toward trouble even if they have never missed a payment!  At this point, most debtors are throwing away considerable dollars into a black hole of high interest rates and fees and teetering on financial meltdown.  With debt negotiation, there are also potential tax consequences and the possibility of legal action taken by a creditor which historically occurs with approximately 3% of individual accounts enrolled.  If you are struggling with overwhelming debt, the benefits of negotiating your debt are likely to far outweigh possible consequences and risks.  Please visit our FAQ page for more information.

Caveat emptor, in this current climate of growing financial woes there are many opportunists and start-ups in the debt help industry. It is imperative to use a reputable company with years of experience such as Debt Point to guide you through the process.  Rest assured that we not only show you the benefits, but also make sure you are aware of all possible negatives so you can make an informed decision.

If your financial ship came in during the late 90’s only to become the Titanic, or is caused from more recent issues, it is important to know where the lifeboats are located.  Simply jumping overboard and hoping there is enough floating debris for everyone may leave you grasping for help in deeper water than you think.


Estimates are based on prior results. We do not assume consumer debt, make monthly payments to creditors, provide tax or legal advice or credit repair services. Read and understand all program terms prior to enrollment including potential tax consequences. Failing to make monthly payments to creditors may result in an adverse credit rating impact, increased interest rates and fees added to balance owed and increased collection efforts including potential legal action by creditors. We do not guarantee that your debts will be lowered by a specific amount or that you will be debt free within a specific time. Individual results vary and not all clients successfully complete programs due to individual circumstances and ability to save sufficient funds. Not all creditors may negotiate or provide settlement offers and full program participation is required. "Live Debt Free" refers to our company belief that consumers should live without debt and does not imply any guarantee. Services not available in all states. Website content does not apply to Canadians. Debt Point Canada can be reached at 888-705-3328 or